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Facts
The assessee engaged in trading of gift articles, originally declared total income of Rs. 2,33,610/-. Information revealed share transactions in Hemo Organics Ltd. penny scrip, profit from which was not offered. A revised return under Section 148 declared Rs. 5,32,060/-.
Held
The Tribunal held that the assessee had already offered the profit from sale of Hemo Organics Ltd. shares in the revised return filed under Section 148, therefore, no further addition under Section 68 was warranted, as it would amount to double taxation.
Key Issues
Whether the profit from sale of Hemo Organics Ltd. shares, already offered in the revised return under Section 148, can be added again under Section 68 as unexplained income.
Sections Cited
139(1), 148, 68, 139(1)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
(Assessment Year: 2012-13) Haresh Chhotalal Shah, Vs. Income Tax Officer, Parth, Empire Building, Opp. Ward-6(1)(4), Rambaug Police Station, Ahmedabad Maninagar, Ahmedabad-380008 [PAN No.AFNPS9349J] (Appellant) .. (Respondent) Appellant by : Shri S. N. Divatia, A.R. Respondent by: Shri Ravindra, Sr. DR 20.02.2025 Date of Hearing Date of Pronouncement 25.02.2025 O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), ADDL/JCIT(A)-7, Kolkata vide order dated 14.12.2023 passed for A.Y. 2012- 13.
The assessee has taken the following grounds of appeal:-
“[1] The Ld. ADDL/JCIT (A)-7, Kolkata has grievously erred in confirming the addition made by the Ld. A.O of Rs. 6,24,490/- by dismissing the appeal for the gain of the Hemo Organics Limited which is illegal and unjustifiable. [i] The appellant submits that the Ld. A.O. has considered the income of the return filed u/s 139(1) and not the return of income filed u/s 148 is illogical and illegal. [ii] The appellant further submits that the gain of the stock was already added to the income as per the return filed u/s 148 of the Act, the Ld. A.O. has made the addition of the same income amounts to double taxation.
Haresh Chhotalal Shah vs. ITO Asst.Year –2012-13 - 2– [iii] Also the appellant submits that the profit of the Hemo Organics Ltd. penny stock of Rs. 6,24,490/- has already been considered in the return of income filed u/s 148 that was treated as an unexplained u/s 68 is illegal. Hence there is no question of un-explanation. [5] The appellant therefore requests your Honour to kindly delete the above mentioned addition of Rs. 6,24,490/- made by the Ld. A. O. confirmed by the Ld. Addl/JCIT(A)-7 Kolkata, looking to the merits of the case. [6] The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
3. The brief facts of the case are that the assessee is engaged in the business of trading in gift articles and cards in the name and style of “Celebration”. The assessee filed original return of income declaring total income of Rs.2,33,610/-. Thereafter, as per information available with the Department, the Assessing Officer observed that the assessee had entered into share transaction of sale of penny scrip of Hemo Organics Ltd. and profits on sale of such penny scrip had not been offered to tax by the assessee in it’s return of income filed for A.Y. 2012-13. In response to notice issued under Section 148 of the Act, the assessee revised it’s return of income on 02.09.2019, declaring total income of Rs. 5,32,060/-. On going through the return of income filed by the assessee, the Assessing Officer observed that the assessee had not offered the profit made out sale of shares of M/s. Hemo Organics Ltd. The Assessing Officer held that since the assessee had not declared income from sale of shares of penny scrip Hemo Organics Ltd., the entire profit of Rs. 6,24,490/- on sale of shares of Hemo Organics Ltd. was liable to be treated as income of the assessee under Section 68 of the Act.
4. In appeal, Ld. CIT(A) dismissed the appeal of the assessee with the following observations:
“As per AO, the appellant has traded in a penny stock, that is the script of Hemo Organics Ltd. The penny stock scripts, like Hemo Organics ltd are identified by Haresh Chhotalal Shah vs. ITO Asst.Year –2012-13 - 3– department after thorough investigation and information was passed to assessing officers of beneficiaries. The appellant had made profit out of share transactions made in Hemo Organics Ltd. through the brokers viz. Prudent Broking and Prabhudas Liladhar Pvt. Ltd. This profit was never reported in the original return filed by the appellant. Therefore, there is no infirmities in treating the entire profit of Rs. 6,24,490/- made out of share transaction in Hemo Organics Ltd. as income of appellant by AO. The case laws/cited by appellant are distinguishable from the fact of the instant case. In the result, the appeal by appellant is dismissed.”
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the additions made by the Assessing Officer.
Before us, the Counsel for the assessee submitted that in the return of income filed by the assessee in response to notice under Section 148 of the Act on 02.09.2019, the assessee had declared total income of Rs. 5,32,060/- in which the profits from sale of shares of all scrips (including sale of the alleged penny scrip of Hemo Organics Ltd.) was also included. The Counsel for the assessee submitted that when the assessee had prepared original return of income under Section 139(1) of the Act declaring business income, the necessary information regarding shares transactions was not available. However, when the assessee received notice under Section 148 of the Act, the necessary statements were collected and thereafter, the assessee filed return of income dated 02.09.2019, declaring net income from sale of shares amounting to Rs. 2,98,446/-. The Counsel for the assessee submitted that in case of sale of shares through a broker M/s. Prudent Broking Services Pvt. Ltd., the assessee incurred net profit of Rs. 2,49,327/- (in which profit on sale of shares of Hemo Organics Ltd. of Rs. 4,55,504/- had already been considered). Further, in the said return of income, the assessee had also declared net profit on sale of shares from another broker M/s. Prabhudas Liladher Pvt. Ltd. amounting to Rs. 1,71,833/- and such net profits also included profit on sale of shares of Hemo Organics Ltd. amounting Haresh Chhotalal Shah vs. ITO Asst.Year –2012-13 - 4– to Rs. 1,68,986/-. Accordingly, the Counsel for the assessee submitted that the case of the assessee is that while filing return of income in response to notice under Section 148 of the Act, the assessee has duly considered and offered to tax net profit from gain on sale of shares of Hemo Organics Ltd. Further, the Counsel for the assessee submitted that the assessee had received copy of “reasons for reopening” only after filing of the return of income. Accordingly, it was submitted that there was no mala fide or deliberate intention in not disclosing income from sale of shares of Hemo Organics Ltd. while filing the original return of income. The case of the assessee is that since in the return of income filed in response to notice under Section 148 of the Act, the complete income with respect to sale of shares of Hemo Organics Ltd. had already been offered to tax, then the same cannot again be taxed by the Assessing Officer under Section 68 of the Act.
In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and Ld. CIT(A) in their respective orders.
On going through the records of the case, we observe that assessee had duly offered gains from sale of shares of Hemo Organics Ltd. made through two broking houses that M/s. Prudent Broking Services Ltd. and M/s. Prabhudas Liladher Pvt. Ltd. in the return of income filed in response to notice issued under Section 148 of the Act. The income from sale of shares of the penny scrip i.e. the Hemo Organics Ltd. had also been offered to tax by the assessee as it’s income in the return of filed in response to notice issued under Section 148 of the Act. Accordingly, in our considered view, since the income / profit from sale of Hemo Organics ltd. had already been offered to tax by the assessee in the return of income filed in response to notice under Section 148 of the Act, no further addition is called for under Section 68 of the Act.
Accordingly, looking into the facts of the assessee’s case, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. 10. This Order is pronounced in the Open Court on 25/02/2025
Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 25/02/2025 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��थ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,